How New Battery Electric Vehicles Impact The Oil Industry

Content Writer

SEO Writer

Asana

Pixlr

Slack

It seems like the 2020s are poised to be the decade of the EV, with manufacturers offering more battery electric and plug-in hybrid vehicles in their lineups than ever before. And with some states putting restrictions on new ICE (internal combustion engine) vehicle sales, it seems like

the selection of new models like the Kia EV9 and Tesla Cybertruck comes just in time

. Today, EVs are still just a small share of global vehicle sales, but they are becoming more and more popular among consumers. With all the new EV models you’re likely to see on the road in the coming years, many people are wondering if this is the death knell for the oil industry. It’s reasonable to think going electric may pose a threat, but while new battery

electric vehicles

will certainly put a dent in overall oil consumption, it’s far from the end for the oil giants.

Trends Show EV Sales Are Reaching Record Highs

The market share of EVs is

growing at an exponential rate

. Back in 2020, while the COVID-19 pandemic was ravaging the global economy, EV sales defied all expectations and continued to rise to a record high. The next year, EV sales kept up the trend and grew steadily, doubling from the previous year by the end of 2021. If we compare EV sales in the first quarters of 2022 and 2021, they were up by 75 percent. If current trends continue, the International Energy Agency (IEA) predicts that there could be more than 300 million electric vehicles on the road by 2030. That’s a staggering increase from the 16.5 million EVs that were on the road in 2021. China is pushing the charge when it comes to global EV sales. Europe is in second place, while the US currently comes in third.

The exponential growth of EVs has to do with a few key factors. First is the wider availability of EV models. There are more pure-play EV automakers to choose from today than just a few years ago, with

Lucid Motors

and

Rivian

being a few notable new players on the block. Legacy automakers are expanding their lineups to include more EVs, as well, with some working to phase out their current ICE models. Other key factors include government incentives for EVs, as well as

improvements in battery technology and affordability

. So what impact do all of these new battery electric vehicles have on the oil industry?

10 Affordable Electric Cars For Everyday Driving

Oil Companies Take A Hit From Rising EV Sales

The exponential growth of EVs presents a clear threat to the oil industry. According to the IEA, 60% of global oil demand comes from transportation. As EVs don’t require oil as a primary fuel source, the global demand could be seriously disrupted. Battery electric and

plug-in hybrid vehicles

are expected to displace about 2.5 million barrels of oil per day by 2025.

BloombergNEF, which provides long-term forecasts on the energy market

, estimates that 21 million barrels per day in oil demand will be displaced by 2050. Zooming back into the US, a zero-sum analysis of President Biden’s goal to have EVs be 50 percent of new car sales by 2030 implies a 34 percent drop in oil demand in that time. A third of oil production declining in less than 10 years would be a big hit to oil companies in the US. Some economists even believe this could trigger a global oil crisis.

But when it comes to the effects EVs have on oil consumption today, the biggest impact isn’t coming from where the media would have you believe. Since 2015, the largest impact has come from electric two and three-wheeled vehicles which are seeing rapid adoption in Asia. These vehicles displaced the demand for 675,000 barrels of oil per day in 2015 and that number grew to 1 million barrels per day by 2021. Of the total oil demand avoided in 2021, these

electric motorcycles

, scooters, and

tuk-tuks

accounted for a shocking 67 percent. The next largest category in oil savings was buses, at 16 percent. Commercial vehicles only accounted for 4 percent of oil demand displaced.

The Truth About The Carbon Footprint Of A New Car That No One's Talking About

Why EVs Will Not Kill The Oil Industry

There’s no denying that the rapid rise of EVs will hurt the pockets of oil companies to some extent, but the global oil crisis that some economists predicted doesn’t seem so realistic anymore. For one thing, EVs will not replace all of our oil demand. The oil industry uses petrochemicals for various other uses, such as feedstock to produce plastics and fertilizers. And of the previously mentioned 60 percent of oil demand that comes from transportation,

only 27 percent is from passenger vehicles

. There are other heavy-duty vehicles like freight trucks and airplanes that aren’t yet ready for electrification and will continue to rely on oil.

Additionally, oil companies are diversifying in anticipation of the rise of EVs. Both BP and Shell have set the goal of becoming net-zero companies by 2050. These companies and others like them are heavily investing in renewable energy and EV charging infrastructure. Yet even if oil demand from transportation takes a sharp dip, total oil demand could still continue to grow. There is continually higher demand for oil from industry, petrochemicals, freight, and aviation. According to ExxonMobil spokesperson Casey Norton, “If every car sold in 2025 was an EV… the global demand for oil and gas would be the same as it was in 2010.”

There is much work to be done in the shift away from fossil fuels. In order for EVs to become more widely adopted, they will have to become more competitive. This requires more affordability, better battery capacity, and expanded charging infrastructure. But even with all the new EVs coming out, they aren’t killing the oil industry any time soon, even if they do make a dent.

Sources: Forbes, Bloomberg, IEA